Financial crisis tops Parliaments' agenda

Today the Reserve Bank of Australia downgraded its growth projections to just 1.5 per cent by next year, half a per cent less than the gloomy Treasury predictions released just last week and the nationís politicians were back in Canberra for the first time in two weeks with the economy leading the agenda.

Transcript

KERRY O'BRIEN, PRESENTER: The political emphasis again this week remains squarely on the state of the economy - global and local - with a little side play on whether Kevin Rudd knows who leaked the alleged content of his recent phone conversation with George Bush.

While Treasurer Wayne Swan is in Washington preparing for his Prime Minister's attendance at the important G20 Summit on the financial crisis at the end of the week, the PM himself was launching a pretty hefty assistance package to underpin the car industry back home - six billion dollars worth of assistance in fact, with the emphasis on green innovation.

At the same time, the Reserve Bank was suggesting growth here is going to slow even more than the Government predicted just last week.

All of which made Parliament a fairly interesting place to be today, as political editor Michael Brissenden reports.

TONY ABBOTT, OPPOSITION COMMUNITY AFFAIRS SPOKESMAN: This is an interesting group. Haven't seen you guys for a fortnight.

MICHAEL BRISSENDEN, REPORTER: And, as we know, in this game, a fortnight can be a long time. The last fortnight's been longer than most; the global financial crisis has gone from catastrophic to even worse; the childcare provider ABC Learning has gone belly up; the Prime Minister's been making a lot of phone calls; Barack Obama's been elected to the White House, and a merchant banker has been elected as Prime Minister of New Zealand - a result that must cheer Malcolm Turnbull up if nothing else. To put it mildly, the return of Question Time has been as anticipated as a five-year-old's Christmas.

SPEAKER: Order. Questions without notice. Are there any questions? I thought there might be. The Leader of the Opposition.

MICHAEL BRISSENDEN: The Opposition's probing began with the matters of the day, specifically, the Government's $6.2 billion rescue plan for the car industry - and more of that in a minute.

There were also the inevitable questions about the differing forecasts for economic growth that have been floated in the past two weeks or so - questions the Prime Minister and his senior colleagues all seemed to have ready answers to.

But there is one other question that does seem to be presenting the Prime Minister with some difficulty. It's more than two weeks now since The Australian newspaper ran a front page article that detailed a conversation between Kevin Rudd and George Bush. On Friday, October 10, the Prime Minister was entertaining guests in the lounge room at Kirribilli. According to the report, it was 10:40pm when the telephone rang. A 30 minute conversation followed with President Bush, during which time, according to informed sources, our Prime Minister was reportedly stunned to hear President Bush say, "What's the G20?"

MALCOLM TURNBULL, OPPOSITION LEADER: Will the Prime Minister assure the House that neither he nor any person in his office disclosed any of the details of this call to The Australian newspaper?

MICHAEL BRISSENDEN: The Prime Minister's only answer today was to insist, as he has before, that the report was wrong and his response to the charge that this may somehow damage our relationship with the US is to highlight John Howard's unfortunate warning last year of the dangers of an Obama victory in the US.

KEVIN RUDD, PRIME MINISTER: The conversation with the President of the United States was about the significance of the G20, the usefulness of the G20 and any suggestion that the President of the United States was not aware of the significance of the G20 was simply inaccurate. What I'd say to those opposite, though, is on the question of our relationship with the United States is when do we get the apology from the Liberal Party for them describing Barack Obama's victory as a victory for Al Qaeda?

MICHAEL BRISSENDEN: Well, yes, the report may have been wrong, but it did contain a quote and other details gleaned from that informed source. An intriguing aspect of this is that according to a report in a sister News Limited publication, one of the guests at Kirribilli that night was The Australian's editor-in-chief Chris Mitchell. But ever since the story broke, the Prime Minister has been unwilling to pinpoint the source of the story. Did it come from his office or elsewhere?

KEVIN RUDD: On the source of individual stories, you know as well as I do, Lane, that there are multiple conversations with multiple people from political offices and elsewhere which lead to the construction of a story.

MICHAEL BRISSENDEN: Regardless of where the story came from, Kevin Rudd more than anyone would know the ramifications of this even getting into the public arena in the first place. And as we're all well aware, by January 20, there'll be a new President in the White House, and whatever criticisms there may have been of him in the past, both sides of politics were singing his praises for Hansard today.

KEVIN RUDD: 45 years after Martin Luther King dreamed of an America where men and women would be judged not on the colour of their skin, but on the content of their character, the people of the United States have made that dream a reality.

MALCOLM TURNBULL: And when he gave that speech, the 44th President of the United States as he shortly will be, was only two years old. He wasn't one of Dr King's children, but he was the child of that prayer, the child of those dreams. And what magnificent dreams. Who among us would have ever thought that we would see this day when a black man was elected to be President of the United States?

MICHAEL BRISSENDEN: One of the first things the President elect has promised is swift action to prop up the troubled US car industry. Here in Australia, the Rudd Government has also unveiled a car industry rescue package worth $6.2 billion to be spent between now and 2020. The so-called "new car plan for a greener future" will see tariffs reduced from 10 to 5 per cent by 2010 and the implementation of a $1.3 billion research and development fund.

KEVIN RUDD: You know, there's a lot of gloom and doom out there, but on days like this, what we are doing is, in the midst of the global financial crisis, rolling up our sleeves and coming out in support of Australian manufacturing and the Australian car industry for the future. That's why we're here.

TONY ABBOTT: There've been a lot of assistance packages for the car industry and I think the real issue for any future package is just how long is this going to last? I mean, will the car industry in this country ever be able to stand on its own two feet?

MICHAEL BRISSENDEN: That's a question we've been asking in this country now for decades. But industry observers do believe this is a real change of emphasis.

JOHN MELLOR, GO AUTO MEDIA: The Government sees the need for the Australian car industry to become a lot more innovative and to actually use innovation to become competitive internationally. One of the things is that if you're trying to compete with countries like China and India on price, you're not going to be able to do it. But if you put the brains of the Australian car industry together and give it the funding that it needs, then you're going to come up with highly competitive motor vehicles.

MICHAEL BRISSENDEN: John Mellor is the publisher of Go Auto Media, a website and industry newsletter. He says the old argument about tariffs is now almost irrelevant. Currency fluctuations have more impact these days, but he believes it is important for the Australian industry to be able to attract a good portion of the global research effort.

JOHN MELLOR: I think that it's a very good thing to put on the table, because if the overseas car companies choose Australia to be the place to do that R&D, then clearly it's got to go into the vehicles that are made here. We benefit and the export markets will benefit.

MICHAEL BRISSENDEN: The car industry package is, of course, also another part of the Government's priming effort to try and stave off the global financial crisis. The car industry employs 65,000 people in Australia and Treasury's own forecasts predict unemployment is set to rise to five per cent and growth could slow to two per cent by next year.

But things could get even worse; the Treasury forecasts are now the most optimistic out there. The IMF puts projected Australian growth at just 1.8 per cent and the Reserve Bank now thinks growth will slow to 1.5 per cent by next year. The RBA's last assessment in August was that growth would be 2.25 per cent by then. A lot's changed, of course, but the economic predictions business seems to be one of the more uncertain aspects of these times.